Post on 04-Jun-2020
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
National Crime Prevention CouncilWebinar Series – May 1, 2013
Targeting Investment Fraud:Using Social Influence to CombatInvestment Fraud
©2013 FINRA Foundation. All rights reserved.
FINRA & FINRA FoundationFinancial Industry Regulatory Authority (FINRA)
► Largest independent regulator for all securities firms doingbusiness in the United States
► Empowered by federal government
► Created through consolidation of NASD and NYSERegulation
► Regulation, enforcement, education
FINRA Investor Education Foundation
► Awards grants and manages targeted projects focused oninvestor education and protection
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
About MeChristine N. Kieffer► Senior Director, Investor Education
► Oversees Targeted Projects Investor Protection Campaign
Military Financial Readiness Project
National Financial Capability Study
► Co-Executive Producer, Trick$ of the Trade: OutsmartingInvestment Fraud
► Served as staff support on President’s Advisory Councilon Financial Capability
► Previously worked at Sallie Mae and NASDAQ
► Other? Mom to two boys
©2013 FINRA Foundation. All rights reserved.
Challenges to Preventing Investment Fraud
Psychological Barriers
►Illusion of invulnerability (I can’t be taken.)
►Reactance (You’re not the boss of me.)
►Threats to self-esteem (I am not stupid.)
►Too much information (I can’t remember what you taught me.)
Systemic Barriers
►Scams everywhere (how do you warn against so many different frauds?)
►Scale (how do you reach a critical mass of consumers?)
►Proving a negative (how do you show when something doesn’t happen?)
►Persistence (if you can show a preventative effect, does it last?)
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
How Big is the Problem?Recent Major U.S. Cases:
► Nevin Shapiro – $880 million Ponzi scheme
► K. Wayne McLeod – $34 million Ponzi scheme
► Bernard Madoff – $50 billion Ponzi scheme
► Stanford Investments – $8 billion Ponzi scheme
► Greater Ministries – $500 million in losses – 18,000 victims
► Hundreds of cases with losses in the $10-$50 million range
©2013 FINRA Foundation. All rights reserved.
Common Features of Scams
►Scams are creativeand consistentlychanging
– Disaster Relief
– Green Energy
– Oil & Gas
– “China” Stocks
– Bird Flu
– Terrorism
►New distributionchannels are constantlybeing created
– Seminars
– Email & Internet
– Direct Mail
– Word of Mouth
– Telephone
– Text Messages
– Answering Machines
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
Moving Beyond Warning Campaigns
Educating CampaignsWarning Campaigns
Specific Generic
Reactive Proactive
Short-term Long-term
Information-based Skills-based
Source: OECD, Examining Consumer Policy: A Report On Consumer Information Campaigns Concerning Scams (2005)
Investor alerts and warning campaigns have limited focus.
©2013 FINRA Foundation. All rights reserved.
Major Research
►Off the Hook (2003) USDOJ/AARP. A survey of 502general population and 132 investment fraud victims.
► Investor Fraud Study (2006) FINRA/WISE SeniorServices. A survey of 499 general population and 71investment fraud victims.
►Stolen Futures (2007) AARP Washington. A survey of 258general population and 125 investment fraud victims.
►National Investor Risk Behavior Study (2007) FINRAand AARP. A survey of 371 general population and 101investment fraud victims.
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
What We Learned: Victim Profile
• Male• 55-65 years old• More financially literate• College-educated• Recent change in financial
or health status• Self-reliant• Higher income• Risk-takers
Victim demographic trends:
©2013 FINRA Foundation. All rights reserved.
What We Learned: Key Risk Factors
• Owning high-risk investments
• Relying on friends, family, co-workers for advice
• Being open to new investmentinformation
• Failing to check background andregistration of financialprofessional and product
• Being unable to spot persuasion
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
What We Learned: Fraud Weapon
Analysis of over 300 undercover fraud tapesMost frequently used persuasion tactics:
► Phantom Riches
► Source Credibility
► Social Consensus
► Reciprocity
► Scarcity
Average # Total Tactics per Transcript
13.35
6.47
0
4
8
12
16
Avg # Tactics
Investment
All Others
©2013 FINRA Foundation. All rights reserved.
Response: Investor Protection Campaign
► FINRA Investor Education Foundation
► U.S. Securities & Exchange Commission
► State Securities Regulators and Other StateAgencies
► National Organizations: AARP, Council of BBBs,National Center for Victims of Crime
► Stanford University Center on Longevity
► Law Enforcement, Crime Prevention andGrassroots Organizations
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
Investor Protection Strategy
Teach investors to:
►Know that are vulnerable
►Recognize persuasiontechniques
►Take simple, highly protectivesteps
– Ask questions
– Check answers
©2013 FINRA Foundation. All rights reserved.
“Outsmarting Investment Fraud” Curriculum
►Outsmarting Investment Fraud
– Understanding Fraud Risk
– Recognizing Persuasion Tacticsused in Fraud
– Preventing Investment Fraud
►Incorporates moderated presentation,videos, and learning activities & exercises
►Call to Action: Deputizes participants towarn others
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
Accepting Vulnerability – Fraud Risk
www.SaveAndInvest.org/meters/risk
©2013 FINRA Foundation. All rights reserved.
Stories
Risk Meter
©2013 FINRA Foundation. All rights reserved.
Resisting Influence – Red Flags of Fraud
Humor
Practice SpottingPersuasion
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
Preventing Fraud – Ask and Check
SaveAndInvest.org can help.
Before You Invest, Ask and Check!
©2013 FINRA Foundation. All rights reserved.
Impact: Field Testing a Curriculum
► Recruit investors to attend one of twoworkshops.
► Deliver new curriculum to the first group,then put both groups in a hypothetical“fraud situation”
► Measure difference in resistance to fraudappeal.
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
Impact: Evaluation of Curriculum
Those who had been to the OIF seminar responded positively tothe fraud appeal 50% less frequently than those who had not.
©2013 FINRA Foundation. All rights reserved.
Response: Free Resources
• Documentary DVD
• Partner Toolkit
• Customizable CD withPresentations
• Portable Flip Chart
• Public Awareness Ads
• Handouts– Fighting Fraud 101
– Investor Kits
– Playing Cards
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
Response: Fraud Research
• Partnership with StanfordUniversity Center onLongevity
• Serves as a hub in the fightagainst financial fraud
– consolidates information
– connects research topractice
– catalyzes research andfunding
• Online atwww.fraudresearchcenter.org
©2013 FINRA Foundation. All rights reserved.
©2013 FINRA Foundation. All rights reserved.
Response: Partnerships► Partnership with National Crime Prevention Council
► Deliver investor protection campaign messagesand materials at the local level. Includes:
– Outreach awards to state crime prevention associations
– “Outsmarting Investment Fraud” trainings
– Webinars
– Crime Prevention Toolkit
– Widespread distribution of unbiased resources and tools
– Tracking reach
► Other Relevant Partnerships – NCVC, NW3C, BBB
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
SaveAndInvest.org/FraudCenter
©2013 FINRA Foundation. All rights reserved.
Sign up for thee-Newsletter!
©2013 FINRA Foundation. All rights reserved.
Reach: Investor Protection CampaignElements:
Dozens of partnerships
Field-tested program curriculum
Award-winning documentary & educational materials
Financial Fraud Research Center
Website and 888-number (888-295-7422)
Paid and earned media
Reach:
46,000+ investors reached through 900+ events
760+ airings of the documentary on 172 public television stations in 76markets across 31 states
130,000 DVDs and 34,000 Fighting Fraud 101 brochures distributed
FINRA Investor Education FoundationChristine N. Kieffer
christine.kieffer@finra.org
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©2013 FINRA Foundation. All rights reserved.
SaveAndInvest.orgA Project of the FINRA Investor Education Foundation
Christine Kieffer, christine.kieffer@finra.org, (202) 728-6970Susan Arthur, susan.arthur@finra.org, (202) 728-8928